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Short-horizon market efficiency, order imbalance, and speculative trading: evidence from the Chinese stock market

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  • Yingyi Hu

    (Southwestern University of Finance and Economics)

Abstract

This paper uses a two-stage regression approach and tick data from 2012 to investigate the factors that affect short-horizon market efficiency in the Chinese stock market. The findings show that market efficiency is significantly related to certain variables for individual stocks, such as return volatility, trading volume, closing price, and trading costs. Furthermore, one specific characteristic of the Chinese stock market, prevalent speculative trading, causes these relations to differ from those in the US stock market. The stocks with high return volatility and high price level are more efficiently priced in short horizons because they have an elevated level of speculative trading, which gradually loses its effect on market efficiency in the Chinese stock market after 15–20 min.

Suggested Citation

  • Yingyi Hu, 2019. "Short-horizon market efficiency, order imbalance, and speculative trading: evidence from the Chinese stock market," Annals of Operations Research, Springer, vol. 281(1), pages 253-274, October.
    • Handle: RePEc:spr:annopr:v:281:y:2019:i:1:d:10.1007_s10479-018-2849-4
    DOI: 10.1007/s10479-018-2849-4
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    More about this item

    Keywords

    Emerging stock markets; High-frequency data; Market efficiency; Order imbalance;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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